Tim Delbridge and Dan Bigelow
As the Capital Press and other outlets have been reporting over the last month, there is a draft plan from the EPA to protect a number of endangered and threatened species through new restrictions on pesticide applications. One of the protected species, the Taylor’s Checkerspot Butterfly, is found here in the Willamette Valley as well as in western Washington. The EPA’s proposed mitigations call for a near-total prohibition on applications of herbicide and insecticide use for non-residential uses in the affected “avoidance area”. That is, if this EPA plan is implemented as currently drafted, farmers and forest managers will not be able to use pesticides on slightly more than one million acres of the Willamette Valley and more than 3.5 million acres of Washington. In addition to the proposed pesticide bans in the avoidance area, looser regulations on pesticide use are proposed for a smaller “minimization area” around its periphery. A well-produced interactive map along with information on the Taylor’s Checkerspot Butterfly can be found here.
This short blog post will outline a few general conclusions that we can come to about the potential economic impacts of the EPA’s plan. We will then use the USDA Cropland Data Layer (CDL) to estimate the acreage of each crop that would be affected in Oregon and Washington. Note that these statistics apply to the avoidance area subject to the strictest proposed pesticide use regulations, which understates the true number of acres that will be impacted. We then provide some early idea of the degree of impact that we might see in different commodity markets.
In general, the EPA plan will remove insect and weed management tools from farmers. The degree of impact will vary by crop and location. Where the restrictions are binding, they will increase production costs, reduce yields, and, consequently, reduce operating profits. The restrictions will make some production systems unprofitable and lead to changes in land use and crop choice. We can be confident that:
- At least in the short term, agricultural land values in the affected areas should fall relative to nearby unregulated areas. It is difficult to anticipate the severity of the potential land value declines. To the extent that farmers will generate less annual net revenue under the EPA restrictions, lower purchase prices and cash rental rates will result. Over a longer time horizon, as producers adjust (see next two bullets), land values and rents may rebound accordingly.
- Many individual farms would suffer financial losses and increased expenses associated with switching production to new crops and/or cropping systems that are less dependent on pesticides. These short-term adjustment costs are in addition to the sustained reduction in profits that could be expected under the new cropping choices. The adjustment costs could be larger for perennial crops, such as blueberries or hazelnuts, that are costly to establish. Note that these adjustment costs include both the tangible financial cost of changing how a farm operates, as well as the investment in learning how to grow something new, which is harder to quantify.
- Organic acreage would increase in the affected areas. High rates of organic adoption (either by existing farms or new buyers/tenants taking advantage of falling land values) in this area could lead to significant increases in overall organic acreage in the PNW. While this might sound positive to advocates of organic agriculture, we could expect some volatility in regional organic markets and downward price pressure on organic crops that are well suited for the affected area. Furthermore, this may be the first example of farms in US being so strongly guided towards pursuing organic adoption, and it is not clear how their success will compare to existing organic farms that chose to transition voluntarily.
- Prices of some of the most affected crops will increase in response to the potential fall in production. Some of these price changes may be tempered as production eventually shifts out of the affected areas. Farms outside of the EPA mitigation zones are likely to benefit financially from the higher crop prices, at least in the short term. Because the regulated areas represent a small fraction of the production land base for most commodities, the price effect will only be noticeable for crops for which the impacted area represents a significant portion of regional or national acreage (e.g. blueberries, grass seed).
By overlaying the EPA maps of proposed avoidance areas on the satellite imagery from the USDA CDL, we have generated a list of crops grown in both Oregon and Washington and the average acres planted in each over the past five years. You can access the full list for both states in a google sheet here. While these estimates are not perfect (and are particularly challenging for crops/forest types that look the same from space) they give us a pretty good sense of which crops would be most affected by the EPA plan. In addition to the agricultural uses listed in the table, note that sizable amounts of forest, wetlands, and developed land also fall in the areas that would be regulated.
In Oregon, grass seed looks like it will be among the most impacted crops. The “Sod/Grass Seed” category from the CDL includes more that 115,000 acres within the EPA avoidance area. That is roughly 25% of the grass seed acreage in the entire state of Oregon, where a vast majority of grass seed is produced. If these grass seed farms were no longer able to use pesticides we would see significant disruption and financial losses for individual farms and a large increase in farm-gate prices for grass seed, at least in the short term. In Washington, more than 7,000 acres of blueberries and 2,000 acres of caneberries fall within the avoidance area, representing about 20-30% of statewide acreage for these crops.
The ultimate fate of the EPA’s proposed pesticide regulations remains to be seen. A unique aspect of the discussion around the proposed rules is that disparate groups of stakeholders, including producers, environmental groups (such as the Center for Biological Diversity), and the USDA, all seem to agree that the regulations go far beyond what is necessary to provide adequate protection for the Taylor’s Checkerspot Butterfly. If implemented as proposed, the impacts of this EPA policy will be far-reaching and will affect farmers and landowners in complex ways. The impacts will be felt beyond the geographic area targeted in the mitigation plan and farmers across the region would be wise to consider them when planning future investments and cropping systems.